Memorandum by Graham Meadows, former Director
General of DG Regional Policy, European Commission, and Honorary
Professor in the School of City and Regional Planning, University
of Cardiff
1. The European Union's structural funds
are financial instruments in support of, respectively, European
regional and cohesion policy (using the European Regional Development
Fund, the Cohesion Fund and the European Social Fund) and European
policy for rural development (the European Fund for Agriculture
Rural Development). Taken together, these instruments account
for 40% of the EU budget but just 0.4% of EU GDP. As such, the
instruments are of less significance to the Inquiry than the policies
and political objectives of the Union which underlie their deployment
and my answers to the Committee's questions will therefore address
the latter.
2. These answers are supplied to the Committee
in a personal capacity. While their focus of attention is on EU
regional and cohesion policy (hereafter EU regional policy), many
of the arguments apply by analogy to rural development policy
which follows many of the same operational principles.
QUESTION
1
(a) The objectives the European Union's
regional policy
3. The objectives of European regional policy
remain valid and should not change if the Union is to maintain
its high level of integration reflected in the single market and,
for 15 Member States, the single currency. The policy concerns
itself with the economic growth of regions and the Union's single
market for labour, and thus contributes to the Union objective
to improve the well-being of citizens through "balanced economic
growth" and the achievement of a "highly competitive
social market economy aiming at full employment and social progress".[1]
The benefits, and costs, of market-driven growth do not fall equally
on Member States and regions. Regional policy is the Union's response
to the concerns raised by the uneven distribution of the costs
and benefits of the single market.
4. European regional policy is one of a
trinity of economic policies through which the Union seeks its
objective of balanced growth.[2]
The three are:
— market-opening, both internally (the
Single Market) and globally;
— the single currency, the Euro, with
its common rules for the macro-management of the economy (the
Growth and Stability Pact) and its common guidelines for managing
the supply side of the economy (the Lisbon and Gothenburg agenda);
and
— regional policy, which encompasses
financial support for the Union's Single Labour Market.
5. European regional policy plays a double
function within the trinity:
— it seeks to help the weakest regions
to close the gap between their income and the Union average thus
seeking greater balance to growth; and
— it contributes directly to a faster
overall rate of growth, both for Member States and for the Union
as a whole, by raising the growth rate of the slowest growing
regions, where resources are underused.
6. The policy also supports the operation
of the Single Labour Market through the European Social Fund,
which is equal to 10% of the Union budget.
7. The policy's delivery mechanism provides
the additional benefit of inciting regions to pursue strategic
investments (see Question 2 below).
(b) The effectiveness of European regional
policy
8. Modifications to the operation of the
European regional policy over time have made it more effective
in supporting other public policies in Member States and regions.
Its structure has proved to be adaptable to changing circumstances.
Introduced, in its present form in 1989, alongside the push towards
the Single Market and the Single Currency, the policy has coped
with successive enlargements which have more than doubled the
number of Member States, increased the number of regions and widened
regional income disparities. At the same time, it has proved itself
capable of adapting to the different public policies of individual
Member States.
9. The core principles of its delivery system
have proved effective. The policy's co-financing rule produces
a leveraging effect which will transform the €350 billion
of Union resources for 2007-13 into an investment fund of €525
billion by attracting matching finance from national public and
private sources; the effectiveness of these financial resources
will be further increased by the concentration of investment
co-finance in space, time and by development priority; the tasks
of strategy-making and programming are devolved to partnerships
of economic actors in the regions themselves (see Question 2,
"European regional policy and subsidiarity").
10. Yet, devolved management takes place
within a frame of investment guidelines and priorities
approved by the Council of Ministers which ensures a European
added value for investments. Thus, in the current period, the
policy's total €525 billion budget will secure the double
benefit of working to balance growth and inciting investments
which are deemed by the Council to have a strategic importance
for the Union. Thus, the policy's delivery system produces important
advantages in maximising the value of Union expenditure.
11. Changes introduced for 2007-13 programmes
have again demonstrated the policy's adaptability and will further
increase its effectiveness in the pursuit of sustainable growth.
They strengthen the policy's link to the Union's agenda for economic
modernisation, expressed in the Lisbon and Gothenburg agenda,
and have led regions to increase their use of EU co-finance for
investments to increase their competitiveness. The better-off,
or "Competitiveness", regions will use 80% of their
EU co-finance in this way; the "Convergence" regions—where
investments in basic infrastructure continue to be essential to
make up for inadequacies in provision—will use 60%.
12. Thus European regional policy seeks
to achieve many of the benefits of the fiscal equalisation systems
used by other, older political entities such as the United States,
at only a fraction of the cost to the taxpayer measured as a percentage
of GDP.
(c) Room for improvement: making European
regional policy more effective and user friendly
13. European regional policy has become
less user-friendly over the past few years due to the increased
complexity of aspects of financial management, including its specific
auditing requirements. It is urgent that this should be corrected.
If audit requirements could be brought into better balance, and
more in line with national practices, the way would be open for
programme management to focus more on performance and the improvement
of value for money.
(i) Financial management and control
14. The growing burden of administration
and financial management being passed to project sponsors earns
the policy a bad reputation, even among direct beneficiaries.
15. The background is the tension between
the different actors in regional policy's shared management—the
EU, the Member States, the regions. They frequently address questions
of financial management in a conflictual way, and this saps mutual
confidence and the possibility of dialogue. The result is that
financial management systems become more burdensome and costly
as requirements multiply and are simply passed down the bureaucratic
line from the European Court of Auditors to the Commission, from
Commission to Member States, from Member States to the regions,
from regions to the citizens. It has been said that few categories
in the UK national budget would meet the auditing standards currently
imposed by the European Court of Auditors.
16. The Lisbon Treaty has redefined financial
responsibilities for the Union budget in a way which might be
especially useful for a policy which is the subject of shared
management, like European regional policy. Revised policy regulations
go in the same direction. But it will be several years before
the benefit of these changes becomes apparent. Also, present practice
in interpreting financial regulations is such that, unless there
is a co-operative and consensual approach between the European
Court of Auditors, the Commission and Member States, there can
be no guarantee that the new rules will lead to a substantial
reduction in the requirements faced by end-users.
17. Therefore, in view of the mounting criticism
it would be desirable for the Commission and the European Court
of Auditors, as two European institutions created by the Treaty
and bound by its objectives, to lead a Union-wide response. They
might, for example, establish a forum where they and the Member
States and regions could analyse together the burdens they are
imposing on citizens, and their costs, and look for ways to lighten
the administrative workload, while still ensuring sound and efficient
management of the Union budget. The "reform" which might
be looked for in this area is not, therefore, changed regulations—at
least not in the first instance—but a new approach. Such
an initiative is becoming a political imperative.
(ii) A better assessment of performance
18. Target-setting by means of performance
indicators and regular evaluation are integral parts of operational
programmes co-financed by European regional policy. Programmes
are evaluated in the preparatory phase, during implementation
and again at their conclusion. The results of evaluations are
widely disseminated.
19. A number of recently-introduced elements
in the policy aim to help regions improve their performance, both
in terms of investment and administration.
— The Jaspers initiative, operated
by the European Commission and the European Investment Bank, provides
technical support to EU-12 Member States to help prepare and implement
large projects, especially in the fields of environment and transport.
— Two initiatives, Jeremie and Jessica,
aim to help regions increase their use of recyclable loan funds
alongside the more usual grant mechanism.
— Another recently-launched initiative
will encourage and enable regions to use European regional and
cohesion policy funding in the establishment of micro-credit schemes.
— The European Investment Bank group
is a partner to the European Commission in each of these schemes.
In addition, the policy's budget includes considerable
funds for technical assistance and Interreg, the initiative for
inter-regional co-operation, which is operated in a fully-devolved
way, encourages regions to form regional networks to share good
practice and learn from one another's experience.
20. The steadily-mounting requirements for
financial management make it difficult for programme managers
to devote sufficient attention to performance assessment. The
same applies to the auditors themselves who lack the resources
to add performance audits to those they carry out for financial
management. This is a part of European regional policy which requires
further development. It may be that a Union-wide system of performance
assessment would be a promising route to the introduction of conditionality
(see Question 7).
QUESTION 2
21. I will argue that, as a result of its
unique system of multi-level governance, the principle of subsidiarity
is more fully-incorporated into European regional policy (and
rural development policy) than any other European policy area.
Also, I will argue that the repatriation, or re-nationalisation,
of European regional policy would risk the loss of important advantages,
among them the curtailment, to some extent, of subsidiarity.
(a) European regional policy and subsidiarity
22. European regional policy's way of working—its
delivery system—is distinctive. It is as important to its
results as its funding. The delivery system aims at a great degree
of decentralisation to Member States, regions and cities and is
integral to the policy. It represents the Union's political choice
for a particular form of economic governance and embodies, and
gives full expression to, the principle of subsidiarity.
23. An examination of the policy's decentralised
implementation system provides a vision of subsidiarity in action.
— The policy is founded on the principle
that regions will chart their own distinct pathways to economic
growth. Taking account of Union, national and regional priorities,
each region writes its own development strategy and operational
programme, building on its strengths and addressing its weaknesses.
No region is obliged to adopt a "one-size-fits-all"
solution. Regions choose the projects they wish to support with
EU co-finance. Thus, planning and project decisions are taken
where understanding, either of the opportunities they wish to
exploit or the problems they seek to confront, is greatest.
— European regional policy provide
a precise focus on economic growth to help guide regions in the
preparation of their strategies and development programmes.
— The Union's investment guidelines
(and, in the United Kingdom, those of the UK government) ensure
for the region (and the UK) a higher added value for the total
investment spend—the double benefit of stimulating growth
and of enabling and prompting strategic investment.
— Regional policy encourages an innovative
approach to economic development and the incorporation of positive
results into development programmes.
— The contact which the policy establishes
between the region and the Union enhances the contact between
the region and other Union policies, like research and enterprise.
24. The answer to Question 6 below shows
how, through the practical operation of the principle of subsidiarity,
it is regions and Member States which determine the allocations
of the European regional policy budget to the European Social
Fund and the European Regional Development Fund.
(b) Repatriating or re-nationalising
regional policy
25. In the present budgetary climate, it
is possible to identify two schools of thought about the role
and future relevance of European regional policy. They have a
number of important differences. Because both schools exist in
the United Kingdom, it may be worth describing them.
26. First some similarities. Both schools:
— recognise that the precise focus
for regional policy is to achieve an improved performance in regional
economic growth in order to diminish income disparities;
— see the task of safeguarding and
developing competitiveness as a constant necessity in successful
economies; and
— accept the need for Union co-finance
in certain conditions and seek to concentrate it in the worst-off
regions and Member States.
27. But alongside these important similarities
there is a major difference, which is chiefly motivated by European
regional policy's impact on the Union budget.
28. The school which favours the present
structure and delivery system for European regional policy—though
it may press energetically for changes in the way the policy works—recognises
that the benefits and costs of the Single Market are not distributed
equally. One result is the creation, or widening, of income disparities.
Another is the loss of competitiveness, which affects regions,
or parts of regions, in, even, the better-off Member States. This
school takes the view that actions to reduce disparities and improve
competitiveness are, therefore, in some measure, a European Union
responsibility and should be supported from the Union budget.
The Union's present European regional policy reflects this school's
thinking.
29. The other school argues for a narrowing
of the Union's budget responsibility by reducing the scope of
regional policy. It would concentrate the budget on the short-term
task of kick-starting the poorest regional and national economies.
Once this was achieved, and a national economy attained a pre-set
income threshold—perhaps 90% of the Union's average GDP—regional
policy would become the financial responsibility of the Member
State and cease to be financed from the Union budget. Each Member
State would be free to choose its own level of financing and its
own implementation system. It characterises this reform as ending
a "one size fits all" policy. Its followers press for
the expansion and deepening of the Single Market, as a permanent
means to growth, and argue for a temporary financial
responsibility for the imbalances which market-driven growth creates.
Adoption of this school's reforms would "repatriate"
or re-nationalise regional policy—in some Member States
immediately, for example EU-15, and for all others later.
30. It is worth asking, "What would
be lost by the policy's repatriation or renationalisation?"
— European regional policy supports
the Union's Growth and Stability Pact since finance from the Cohesion
Fund is conditional in relation to the rules for the sound management
of public finances.
— It is characterised by micro-economic
conditionality in key fields, since it requires full respect for
rules on state aid, public procurement, the environment and equality
of opportunities. Thus it helps the single market to become a
race to the top rather than a race to the bottom where social,
environmental and other standards are sacrificed.
— Its seven-year programmes offer Member
States, regions, and cities medium-term stability, with financial
resources guaranteed, within which to organise and implement their
economic growth policies.
— Management of programmes by local
partnerships brings the benefit of local ownership, which increases
the region's motivation and helps build local knowledge of development
techniques. This contributes towards sustainability. An alternative
management model frequently selects as leader a "big hitter"
which leaves little management capacity behind when it eventually
moves on.
— European regional and cohesion policy
has encouraged regions to adopt a more sophisticated approach
to risk. Fraud or misuse of funding is not tolerated but, in the
selection and management of projects, regions are encouraged to
manage, rather than avoid, risk. This approach brings development
benefits in regions where growth is urgently needed. Examples
of projects in the United Kingdom which have managed risk in this
way would be the Merseyside Special Investment Fund, which opened
the way to EU financial participation in recyclable funds; the
Key Fund in South Yorkshire which made it possible to overcome
problems of matching finance; the Combined Universities of Cornwall
which enabled higher education facilities in the county to combine
their specialities to offer a range of university courses and
research.
— The development of cross-cutting
themes has enabled regions to further increase the added value
of European funding. Regions have frequently assessed their entire
development effort against themes they considered of major importance—for
example, the equality of employment between men and women or social
inclusion. Environmental concerns have been a major beneficiary
of this approach (see Question 4).
— The policy is built around a Union
benchmark—evolution of the Union's average income per head—which
has a greater relevance for the balancing of growth than national
averages.
— European regional policy contributes
to the realisation of the Union's single labour market. The European
Social Fund is an important complement to legislative action and
policy co-ordination under the renewed Lisbon agenda. It is delivered
through regional policy.
— The policy's delivery system transforms
a system of financial redistribution into a policy for balanced
and strategic economic development. The objective method of determining
policy expenditure and its distribution between Member States,
as well as the method of its delivery into actual projects, offers
assurance to European policy-makers that expenditure will be used
to create Union-wide growth and thus be more than financial transfers.
Resources earmarked as necessary for growth are thus proofed against
other, short-term budget considerations.
— The policy's delivery system provides
a framework for Member States, regions and cities which enables
them to improve the strategic element in their own policy. In
addition, its discipline encourages them to improve their practices
of administration and financial management to the best international
standards.
— European regional policy provides
a framework and resources which allows cities, regions and Member
States to work together to promote exchanges of experience and
best practice.
31. Member States could do many of these
things for themselves if they wanted to—though macro-economic
conditionality would be difficult and the national electoral cycle
would tend to render the seven-year implementation period difficult
to achieve. But it is clear that it is, mostly, only within
the operation of the Union's regional policy that they actually
do them.
32. European regional policy makes the Union
visible to citizens and brings it closer by supporting them through
severe economic change. Its programmes, managed by local economic
actors in regions and cities, have deployed the European Regional
Development Fund, the Cohesion Fund and the European Social Fund
to co-finance, perhaps, more than half a million projects throughout
the Union, to assist the training of 4 million people a year,
to help 1.2 million women a year to return to work and another
200,000 from disadvantaged groups. In addition, the Solidarity
Fund has helped citizens affected by natural and man-made catastrophes
and the Globalisation Adjustment Fund is helping those who need
to change jobs because of business restructuring. If the policy
were not there, many citizens would be poorer.
33. But the policy has a poor record in
claiming credit for its achievements. Efforts to improve the effectiveness
of the policy should make this a major concern and establish a
consensus with Member States and regions which will ensure proper
recognition of the European Union role in regional economic development
and in improvements in the functioning of the labour market. Some
United Kingdom regions make this a priority, seeking to go further
than the minimum which is required in the policy's current regulations.
The United Kingdom would be well-placed to play a leading part
in raising citizens' awareness of the benefits the policy brings.
QUESTION 3
34. Most notably, the previous two enlargements
of the Union impacted on European regional policy in two ways:
— Accession of additional population
with an income considerably below the Union average created a
large new budget demand. In the climate of budget austerity this
could not be wholly met through increased funding and entailed
a switch in support from less-well-off regions in EU-15 to regions
in the acceding Members.
— The low incomes of the acceding Member
States reduced the Union's average income by 15 percentage points.
The immediate result was that a number of regions, still in the
process of restructuring their economies, lost their priority
status for regional policy support because the Union threshold
fell below their own average income. The longer-term result is
that high-intensity support from European regional policy is lost
to regions earlier in their restructuring process—or, put
another way, at a lower level of income—thus leaving them
in a less strong position to continue their development.
35. Any discussion of how European regional
policy might be adapted to prepare for future enlargements of
the Union should be grounded in an understanding of its key features.
Notably, the policy should continue to:
— apply to all regions with variations
in aid intensity according to national and regional levels of
prosperity;
— provide a link between European regional
policy and the Union's macro-economic policy and the Growth and
Stability Pact (see Question 8);
— operate within its seven-year programming
period, thus providing a stable medium-to-long-term framework
in which regions can formulate and carry out their strategies
to accelerate growth and converge on the Union average;
— set a European target for growth,
the Union's average level of income per head, as a realistic benchmark
against which to judge performance;
— operate in a decentralised way, fully
reflecting the principle of subsidiarity, thus safeguarding against
any tendency to force regions into "one-size-fits-all"
policies and strengthening their involvement in their own economic
development;
— insist on co-financing which, through
financial leverage, increases the financial resources available
for regional development;
— focus on competitiveness, which is
of key importance to all regions, whatever their level of income;
and
— link and, as far as possible integrate,
investments in business and infrastructure with those in the development
of the labour market.
36. In further considering what changes
may be necessary to meet the challenges of further enlargement,
the following factors will be relevant: a) the size of the acceding
countries; b) their degree of economic development; and c) their
physical proximity to poles of development. Experience shows that
the Union could profit from building further on the policy's strengths.
— Regional policy should continue as
an economic policy of the Union. But there may be room
to develop the use of other European indicators besides GDP per
head (for example, for the labour market, environment, research
and innovation performance) to give additional guidance to regions
as to how they should shape their regional growth strategies.
This would further tie the regions into the goal of economic modernisation
and sustainable development and provide a basis for pursuing targets
like those for carbon emissions.
— Financial leverage and the value
for the Union budget is a major preoccupation. It is important
that the Union achieves a better mix of loans and grants, with
regions allocating more of their funding to recyclable loan funds.
The latest reform of European regional policy recognised the importance
of capital provision for regional development and introduced a
number of pilot schemes. The policy should now go further. Perhaps
the Union can establish, through negotiation with each Member
State and region, target shares of their regional policy funding
to be used in co-financing recyclable loan funds.
QUESTION 4
37. It will be useful to keep in mind that,
in effect, European regional policy is implemented in two stages.
In the first, the Policy's budget is allocated (distributed) to
regions and Member States according to their economic performance
and need. This is decided by the Commission and Member States
at the beginning of the programme period and reflects the Policy's
objective of seeking sustainable improvements in regional economic
performance. The second stage begins once the financial allocation
has been made when regions and Member States decide for themselves
on their development strategy and programme. It is at this second
stage that regions would take account of climate change or social
inclusion.
38. Ever since the policy's reformulation
in 1989, the Union has persuaded regions and Member States that
they should give priority to investments in environmental protection
and social inclusion, since these both influence the sustainability
of growth. The funding devoted to such investments will total
around €72 billions in 2007-13 programmes—€62
billions for the environment, €10 billions for social inclusion.
The question of migration has risen rapidly in the policy agenda
of many regions, including regions and cities in the United Kingdom,
revealing itself as a volatile, Union-wide phenomenon, spanning
issues like globalisation, enlargement and the Single Market.
It is reflected in an increased effort by many regions to put
in place improved arrangements for the integration of migrant
and ethnic minority communities. It is a question which lends
itself to a response at the Union level.
39. The impact of investments for climate
change, social inclusion and for actions related to migration
will be further magnified by the retention of these three areas
of interest as cross-cutting themes in many programmes. This has
become standard practice for a number of themes for development.
The regional partnership for East Scotland played a leading part
in a trans-European network on sustainable development, pioneering
and disseminating in the Union an environmentally-aware process
for project selection.
QUESTION 5
40. The Union recently succeeded for the
fourth time in establishing a multi-year budget framework running
until 2013. The existence of this multi-year framework, which
does not replace the succession of annual budgets, makes possible
the multi-year framework for regional policy. This benefit is
transmitted directly to regions making it possible for them to
plan for the medium to long-term in full confidence that the agreed
amounts of Union resources and the matching finance will be available
to them.
41. The proposed EU budget for regional
policy is built on two calculations.
— The larger part, that for the poorer
Convergence regions, is built by first identifying the regions
which have, during the three-year reference period, achieved an
income equal to or less than 75% of the average Union GDP per
head. Next, harmonised economic data for each region, covering
regional GDP and unemployment rates, are fed through a formula,
first accepted by the Union at Berlin in 1999, in order to arrive
at a financial allocation by region. These regional allocations,
capped at 4% of national GDP, are then summed to obtain the total
budget required, from which can be determined the Member State
shares. This system of construction accounts for 80% of the 2007-13
Union budget for European Cohesion Policy.
— It is the remaining part of the regional
policy budget which experienced the most significant reduction
for 2007-13 in order to ensure funding at sufficient levels of
intensity for the EU-12 member states. Calculating this part of
the budget takes account of previous Union decisions and allocates
funding between Member States, based on an examination of regional
economic data referring to regional GDP per head, unemployment,
employment, educational and training attainment, population and
population density. These data give an allocation by Member State
and are used to derive "recommended" allocations of
funding by region. Funding is also allocated to the Interreg instrument
for cross-border co-operation, and to technical assistance.
— Once the total budget is decided
by the Union, the same method is followed in reverse to establish
the allocations by region.
— For the Cohesion Fund, an overall
allocation is distributed among the eligible Member States according
to a formula which takes account of the size of the country, in
terms of surface and population. The resulting national allocation
is then adjusted to reflect the relative wealth of each country.
Eligible countries are those which have, during the three-year
reference period, achieved an income equal to or less than 90%
of the average Union GNI per head.
42. The present criteria conform with the
policy's identity as an economic instrument, which seeks to promote
the growth of poorer regions and the competitiveness of better-off
regions in order to help them reduce the disparities between their
average income and that of the Union. And the order in
which decisions are taken is fully in line with the principle
of subsidiarity. The allocations are arrived at by an objective
method, on the basis of harmonised data, and the method is applied
across the Union. Small adjustments are made in the political
process of the final decision-making, but I have calculated that
these amount to less than 1% of the regional and cohesion policy
budget. The order of decision hands responsibility to the regions
and Member States once the overall European regional policy budget
is allocated to regions. It is the regions, through their respective
operational programmes decided in line with their own economic
conditions, which decide the size of the policy's constituent
funds. As long as European regional policy remains an economic
instrument, embodying subsidiarity, these criteria will be appropriate.
43. Given that regional policy is an economic
instrument of the Union, the Union's GDP per head should continue
to provide its essential benchmark. But there is room to develop
the use of other European indicators to give additional guidance
to regions as to how they should shape their regional growth policies
(see Question 3 above).
44. At this stage it will be useful to anticipate
the last part of Question 6 on whether it is appropriate that
regional eligibility criteria should be discussed at the same
time as the wider discussion on the Union budget. Since the size
of the European regional policy budget is directly geared—in
the way described above—to economic conditions in regions,
it is in the interest of budget transparency that regional eligibility
criteria should be known (i.e. decided) at the time the budget
is set.
QUESTION 6
45. At present, the policy essentially divides
the Union's regions into two groups. The Convergence regions have
an income (GDP) per head of 75% of the Community average, or below,
and receive the bulk of the policy's funding (80% of funding for
35% of population). Competitiveness regions are those above 75%
of average income and qualify for a much lower intensity of funding
(12% funding, 60% population). A small number of Competitiveness
regions—those which were Objective 1 (now called Convergence)
regions in 2000-06 and a group which would have been Convergence
regions but for the fall in EU average income because of Enlargement—receive
extra funding on a temporary and degressive basis in order to
palliate their change in status.
46. This creates a situation in which regions
in the no-man's land between 75 and 100% of the Union's average
income receive little support for their efforts towards economic
modernisation, with the consequence that their growth performance
is impaired. This might be seen to be important to those regions
whose income is not far above 75% of the Union average. In addition,
it should be borne in mind that the Union's average income was
reduced by 15 percentage points as a result of the last two Union
enlargements. This drop in the average, in effect, raised a number
of regions above the 75% threshold despite the fact that their
economic modernisation was, perhaps, still at a sensitive stage.
47. This makes it appropriate to consider
the creation of a third category of regions between Convergence
and Competitiveness (perhaps to be called Regions in Transition).
This third category could be defined as being between 75% and,
say, 100% of the Community average income. The intensity of the
financial allocation to these regions should lie mid-way between
those for the Convergence and Competitiveness regions. Introduction
of such a category would make it necessary to revisit the method
of deciding on budget allocations to regions and to categories
of regions. Proportional concentration on the very poorest would
be reduced, though not necessarily by the same percentage as the
absolute level of funding.
48. The gains to the Union would be two-fold:
a more determined action to reduce the regional income disparities
caused by the process of economic growth; an additional stimulus
to growth itself.
QUESTION 7
49. The European Cohesion Fund has, since
2000 been conditional on a Member State's compliance with the
terms of the Stability and Growth Pact. The present Cohesion Fund
regulation allows for the suspension of all or part of a Member
State's commitments from the beginning of the year after the
decision to suspend. The decision to specify commitments and the
time-lag before the suspension enters into force reflect a wish
by the Union not to push a Member State further into deficit.
This may easily happen if payments from the Union budget are suspended
since Member States will be legally obliged to continue co-finance
to projects once it has committed to them.
50. This is, therefore, a delicate issue,
since a sanction of this nature could make it even more difficult
for beneficiaries of the Cohesion Fund to meet the terms of the
Growth and Stability Pact, for example, in covering their public
expenditure deficits.
51. Any extension of conditionality to take
on board the Broad Economic Policy Guidelines would need to take
such considerations into account—as well as their non-constraining
nature as guidelines—while recognising that the impact of
regional programmes is predominantly at the micro-economic level.
Rather, it would seem preferable to develop the conditionality
of regional policy from within and, in response to Question 1
above, the suggestion is made that financial support from the
Union should become more conditioned by the meeting of performance
targets.
8 January 2008
Member States who are also members of the Euro
zone must heed Stability Pact rules. Even those outside the Euro-zone
manage their currencies so as to keep within a particular relationship
with the € and with an eye on Stability Pact rules. And all
Member States accept the Lisbon and Gothenburg agenda.
Just as all Member States benefit from the positive
effects of growth induced by the Single Market and Single Currency,
so they may suffer, perhaps disproportionately, from the imbalances
caused by the more rapid growth.
1 Both quotations are from the recently-signed Lisbon
Treaty. Back
2
This emphasises the ro®le of Union policies in economic
growth, whereas most national governments would argue that their
growth record-especially if it is good-is due to their own economic
management. In part this is true, national macro-economic policy
is obviously crucial to growth. But at the same time, national
macro-economic policy is made within a Union context. All Member
States benefit from the growth inducing effect of the Single Market
and from the Union's trade agreements with third countries. Back
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